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If you're claiming a deduction for meals, entertainment, auto or travel expenses, expect the IRS to closely review it. Too often, taxpayers have incomplete documentation or try to re-create records months (or years) later. In doing so, they often fail to meet the strict substantiation requirements set forth under tax law and by the IRS. Tax auditors are adept are rooting out inconsistencies, omissions and errors in taxpayers' records, as illustrated by a recent U.S. Tax Court case. (Crawford v. Commissioner, T.C. Memo 2014-156)
No one predicted that June gas prices would rise to their highest levels since 2011. Usually, gas prices peak in early spring and drop in June. This year, however, they're staying high due to routine maintenance on U.S. oil refineries, mounting turmoil in Iraq and increased demand as millions of vacationers hit the roads this summer.
Driving to and around your vacation destination won't necessarily be cheap this summer, especially with a gas-guzzling V-8 or recreational vehicle. AAA reports that the national average for a gallon of regular gasoline was $3.68 on June 20, compared to $3.60 in June 2013, $3.50 in June 2012 and $3.68 in June 2011.
The all-time high for June gas prices was $4.11 per gallon, which occurred in June 2008.
Which States Pay the Most (and Least) for Gas?
-- Source: AAA Daily Fuel Gauge Report for 6/20/14
Simple Ways to Use Less Gas
Here are a few tips to lower your gas expenses while on vacation:
Get a check-up before take-off. Before a road trip, visit the mechanic to ensure your vehicle's in tip-top shape. Make sure tires are adequately inflated. Change the oil and replace filters. A serious maintenance problem -- such as a faulty oxygen sensor -- can reduce your vehicle's fuel efficiency by as much as 40 percent, according to the U.S. Department of Energy.
Drive smoothly and follow the speed limit. Speeding, rapid acceleration and quick stops lower fuel efficiency by as much as 33 percent.
Limit idling. If the grandpa and kids need a rest stop, turn off your car while you wait. Idling gets zero miles per gallon, and vehicles with larger engines waste more gas when they idle than those with smaller engines, especially if the air conditioning is running.
Rent fuel-efficient vehicles. If you're flying to your destination and renting a car, select the model with the highest fuel efficiency. According to the updated fuel economy guide released by the Environmental Protection Agency and Department of Energy, 2014 non-electric models that get the highest miles per gallon (combined city and highway) include:
- Toyota Prius 2 (50 mpg);
- Ford Fusion Hybrid (47 mpg);
- Honda Accord Hybrid (47 mpg);
- Lincoln MKZ Hybrid (45 mpg); and
- Volkswagen Jetta Hybrid (45 mpg).
Fuel efficiency isn't limited to plug-ins and hybrids, however. If you can't find a hybrid to rent, consider these other fuel efficient gas-powered models that may be used as fleet vehicles:
- Mitsubishi Mirage (40 mpg);
- Ford Fiesta SFE (37 mpg);
- Nissan Versa Note (35 mpg);
- Volkswagen Passat or Jetta TDI (34 mpg); and
- Chevy Spark (34 mpg).
Have Gas Prices Peaked?
It's anyone's guess where gas prices will head this summer. AAA spokesman Michael Green predicts, "If the situation [in Iraq] continues to get worse, American consumers can expect to pay more at the pump." A major disruption at U.S. oil refineries or hurricane damage could also lead to higher gas prices. Fortunately, the National Oceanic and Atmospheric Administration predicts a mild hurricane season this year. Cross your fingers!
To add insult to injury, two U.S. Senators unveiled a proposal on June 18 to increase federal gas and diesel taxes by 12 cents per gallon to keep the federal Highway Trust Fund afloat. We currently pay 18.4 cents in federal taxes on every gallon of gasoline and 24.4 cents for every gallon of diesel fuel. The proposed increase would be applied in two annual increases of six cents each. The Senators are still working out the details of the plan, however. If any gas tax increase passes, it probably wouldn't happen until after the November elections -- long after you're back from your summer road trip.
Are you planning a vacation this summer? Two-thirds of Americans have at least one leisure trip planned this summer, according to a recent poll by Harris Interactive, a Nielson Company. That's 2 percentage points higher than last year's poll and 6 points higher than 2012. AAA expects 2014 to be the busiest travel season since 2000, thanks to economic improvement and pent-up demand.